Absorption of office space continued its stride in the January-March quarter, with transactions rising by 8%, according to estimates released by international property consulting firm CBRE India. The firm said almost 8 million sq ft was leased out during the quarter. Leasing during the quarter was led by the Delhi NCR (National Capital Region), Bengaluru and Mumbai, accounting for almost 55% of the transaction activity, followed closely by Hyderabad.

Interestingly, office space absorption was dominated by small and medium-sized transactions. Small-sized transactions (less than 10,000 sq ft) comprised 43% of all transactions, which means shop sizes ranging up to 10,000 sq ft. In comparison, large sized deals, above 1,00,000 sq ft, comprised just 6%, the likes of IBM, Nokia, WeWork, Jacobs Engineering being the main contributors.

“It used to be the BPO, the IT and the e-commerce segments that mainly paid top dollars for such large spaces and now these sectors are expanding but in a calibrated manner,” said Navin Makhija, managing director of the Wadhwa Group, which owns an office block in Mumbai’s mega business district, Bandra Kurla Complex (BKC). In BKC, the demand is maximum for spaces sized between 5,000 sq ft and 7,000 sq ft segment, Makhija said.

Approximately 3.1 million sq ft of new supply was completed during the quarter; a drop of almost 60% on a year-on-year basis, the CBRE report said. Hyderabad and Mumbai’s share was more than 60%; followed by Pune at 19%. Delays in regulatory clearances were reported in Delhi NCR, Bangalore and Chennai, resulting in large supply slippages mostly in peripheral locations of these cities. Negligible supply addition was recorded in Kolkata and Kochi. “Supply declining across cities will naturally escalate rents in the near term,” said Anshul Jain, managing director of Cushman and Wakefield, India.

Up until three years back, developers did not invest in commercial projects in a major way because the residential space was performing and no one pre-empted that absorption will be touching all-time high levels, Jain said. Now that the sector has adjusted to current dynamics, the lack of supply will be compensated for, but at the end of 2018, he added.